The BBC's Industry Correspondent, Stephen Evans"The climate for car making in Britain is getting much, much harsher" real 56kThe BBC's Business Correspondent, Greg Wood"Car making is being concentrated in fewer places" real 56k

Tuesday, 12 December, 2000, 16:18 GMT

GM to axe jobs worldwide

General Motors has unveiled plans to cut about 10% of its salaried workforce in the US and Europe.

It is unclear how many jobs will be lost globally, but the company had already announced job losses of 2,500 in the UK alone.

As part of the global restructuring, the company plans to phase out its Oldsmobile division over the next several years.

Oldsmobile - maker of the Alero small car and the Aurora sedan - is expected to see its sales reach their lowest level in 40 years this year.

"We stretched to find profitable ways to further strengthen the Oldsmobile product line, including developing products with our global alliance partners, but in the current environment, there was no workable solution," GM president and chief executive Rick Wagoner said.

"But it will allow us to strengthen and grow our remaining GM brands."

Slowing economy

GM is one of many US companies which have seen their sales hit as the economy - coming out of an 11-year boom - has started to slow. Weaker consumer demand has also hit rivals such as Ford and DaimlerChrysler hard.

GM also blames weakness in European markets, such as Germany, and the poor performance of Isuzu in Japan.

The company now forecasts that its full-year net income will be $5bn, compared with analyst forecasts of $9bn.

Shares in GM rose $2.25 to $53.87 on the news.

In the UK, car firms - facing industry-wide overcapacity in Europe - have been hit by the strength of the pound against the euro when exporting UK-made cars to continental Europe.

Vauxhall plant closure

Earlier on Tuesday, GM announced that it planned to close its Vauxhall car plant in Luton, Bedfordshire, a plant previously thought to be one of the most secure in the UK.

The problem is that demand for the Vectra, which is made at the plant, is low, and GM has decided to concentrate production of the Vectra's replacement on the continent, primarily in Germany but also in Holland.

Chairman Nick Reilly said the decision was necessary to retain competitive manufacturing in the UK.

Union leaders reacted with disbelief to the news and said they would campaign to keep car production at Luton.

The factory was opened in 1905 and is at the heart of the local community.